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Monday, October 26, 2015

By Senator Brian Kelsey - Last
week I filed legislation which would repeal the Hall tax next year. As
you probably know, the Hall tax is a 6% tax on interest and dividends.
This past session I proposed legislation that would have phased out the
tax over three years. Better to abolish the tax next year. The
Hall tax especially hurts our seniors and those who have saved for
their retirement, as almost half of those who pay the tax are 65 or
older. Not only that, nearly 9 of 10 individuals who pay the tax have
less than $34,000 per year in investment income.

Now is the time
to repeal the Hall tax forever. Opponents of repealing the tax have
prevailed in past sessions by claiming there was not enough state
revenue to off-set repeal. That objection is off the table this year.

Tennessee
has a $600 million surplus in over-collections, and the Hall tax brings
in only $167 million in state revenue each year. Economists project
that at least half of this year's budget surplus will be available in
future years to "pay" for the repeal without any cuts necessary.

For
example, University of Memphis economist Dr. John Gnuschke recently
stated, "While substantial budget fluctuations occur, the natural growth
of state tax collections should exceed $300 million. Over collections
could exceed $300 million as long as state spending is held in check."

I,
for one, intend to hold state spending in check. All lawmakers who
believe in limited government should commit to giving this money back to
the taxpayers before spending it on pet projects. Many such projects
have already been proposed, but Republican supermajorities should reject
them in favor of tax cuts.

We can no longer rest on our laurels
from 2012. That year, the legislature repealed the gift tax, reduced
the sales tax on groceries, and phased out the inheritance tax over four
years. That phase out will be complete January 1, 2016. The logical
next step in Tennessee tax relief is to repeal the Hall tax effective
January 1, 2017.

A final objection to repealing the Hall tax
comes from local government. An additional $90 million in Hall tax
revenue is shared with the city in which the taxpayer resides or the
county if the area is unincorporated. As you might expect, some cities
receive far more of this revenue than others. Cities and counties should
decide among themselves how to distribute their share of the revenue,
and the state should send that money back to local government. Tennessee
can afford repeal of the Hall Tax next year without cutting one dime
from state or local government.

This legislation won't be voted
on until the General Assembly reconvenes in January, but I hope you will
let your state legislators know now how you feel about this tax.

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